CONSUMER FORUM

New home heating energy contract protections in place

Posted April 14, 2012, at 6:48 p.m.

It doesn’t go as far as some wanted, but there is a new law designed to better protect homeowners who prepay for home heating energy.

The Maine Legislature has passed, and Gov. Paul LePage has signed, a law that should provide greater legal protection for people who use prepaid home heating contracts. On March 30, the governor signed LD 1895, An Act To Protect Consumers by Strengthening the Laws Governing Prepaid Home Heating Oil Contracts.

Under the new law, an oil dealer who offers prepaid contracts to Maine consumers for home heating oil, kerosene or liquefied petroleum gas must register the dealer’s intent to offer those contracts with Maine’s commissioner of Professional and Financial Regulation every year by June 30. Those dealers also must file reports with the commissioner by Oct. 31 to demonstrate how they will honor those contracts.

The law was a response to some recent cases in which oil dealers accepted money from consumers, then failed to supply the fuel. This left those customers without oil and without the money they had paid.

In a news release last week, Gov. LePage said the vast majority of oil dealers are honest and reputable. He said Maine law was strengthened “to discourage the rare case when a dealer doesn’t meet its obligation.”

Commissioner Anne Head says officials from her department and Maine lawmakers worked with oil dealers on ways to make sure dealers live up to the terms of their prepaid contracts. She said her department will continue to work with dealers “to provide an extra layer of protection to consumers.”

Stakeholders who worked on the new law saw the reporting requirements as a kind of “early warning system,” which could let regulators know if a particular dealer seemed to be headed for financial trouble. Dealers as a group resisted efforts to require bonding or a mandated line of credit, fearing that banks and bonding agencies would be reluctant to extend credit or issue bonds to cover prepaid contracts.

Violating the new law will be considered a violation of the Maine Unfair Trade Practices Act. The annual report must include a notice that making a false statement can be punished as a Class D crime, which is a misdemeanor. The commissioner has to report to the Attorney General the name of any registered dealer who doesn’t file the required report or who makes a false statement on the report.

The Legislature passed a law in 2005 that bars dealers from offering prepaid contracts, unless they have one of three forms of financial protection:

• A contract with a supplier, guaranteeing a fixed price for the dealer to obtain at least 75 percent of the maximum gallons the dealer has contracts for;

• A surety bond equal to at least half the amount shelled out by prepaying customers; or

• A letter of credit equal to the full amount paid by customers with prepaid contracts.

Last May, Attorney General William Schneider warned consumers to do their homework before signing any prepaid contracts. The previous, colder-than-normal winter saw a number of dealers unable to meet contract obligations. With summer on its way — a time when heating oil prices traditionally drop and customers seek to lock in lower prices for the next heating season — we will renew the AG’s advisory.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s membership-funded, nonprofit consumer organization. Individual and business memberships are available at modest rates. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer 04412, visit necontact.wordpress.com or email contacexdir@live.com.

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